Bitcoin with almost 10 percent. decline in May. Liquidity risk is increasing

After a very good start to the year, the price of bitcoin has retreated by almost 10% since the beginning of May alone. and is the lowest since mid-March. Although the rate of return on BTC in the US dollar is still almost 60 percent since the beginning of the year, there is a large discrepancy with the Nasdaq 100 index, with which bitcoin previously correlated.

End of positive correlation with Nasdaq 100

On a monthly basis BTC / USD exchange rate dropped by more than 12 percent, and at the same time the Nasdaq 100 index rose by more than 4 percent. This may show that the BTC price is not only the result of liquidity, risk appetite, interest rate prospects, but also has its own internal factors - negatively affecting the rate this month. According to industry news earlier this week, Bloomberg reported that Jane Street and Jump Crypto, two of the biggest cryptocurrency market makers, will withdraw from cryptocurrency trading in the United States as regulators continue to crack down on the industry. The lack of large market makers in such a large market as the US market may cause high volatility and concerns of market participants.

In general, we will see much greater price swings both ways as many of the big market makers have significantly reduced the provision of liquidity to the exchanges. In general, larger makers create more price stability due to the liquidity they provide. It should be added that at the end of February Federal Reserve, Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency issued a joint statement warning banks about the liquidity risks associated with the banking of cryptocurrency companies.

It may also mean that some companies want to monetize their cryptocurrencies before they can't do it precisely due to the lack of liquidity. If the holder of a large amount of tokens, with low liquidity, wanted to sell them, he could push the price down significantly, and the profitability of such a sale would be lower.

So it seems that bitcoin and other cryptocurrencies may be under supply pressure even despite positive sentiment for other risky assets until the political and regulatory situation in the US regarding this market is not rectified. From the point of view of bitcoin itself, a drop towards USD 22000 is possible, and if sentiment and liquidity do not improve, even towards USD 14000. Only overcoming USD 31500 could open the way to 38-40 thousand. USD.